Buying a home is an exciting adventure that can also get very complicated. For that reason, there are several things every first-time home buyer needs to know. Here are five of the key things you should know when planning to buy a home for the first time.
1. Know What You Can Afford
Knowing what you can afford is a crucial step in home purchasing. Homes tend to cost a fortune, and in some cases, you might need a home loan or mortgage. This might come with a hefty down payment that could cost you a significant amount of your money.
Therefore, you need to know the price of a home you can afford. This depends on a wide range of factors like your income and other variables. You should inquire from a realtor Santa Monica to find out what homes are ideal for your budget.
This will also give you an idea of the type of loan you can apply for. Generally, experts recommend that your home payment shouldn’t be more than 28% of your gross monthly income.
For example, if you have a monthly income of $10,000, multiply it by 0.27 and you find out that you should not pay more than $2,700 per month on the mortgage. This is aimed to give you financial freedom and prevent bankruptcy. You will be spending what you can afford on the mortgage.
2. Get an Ideal Real Estate Agent
You might be used to buying things yourself — searching through various online shops, making an order, and waiting for the item to be delivered. This is not the case with buying a home. The process of buying a home can be challenging and complicated. It requires the transfer of title search, and deed, and involves lots of paperwork.
Apart from that, you need to evaluate the house and ensure there is no problem. It might look great to you but contains various problems inside — insect infestation or has a nuclear power plant just nearby.
This shows that there are many steps involved that could be tedious to handle alone. The significant amount of money involved will need you to be sure of everything before making a hefty down payment.
One way of doing so is having an experienced real estate agent that is familiar with the process. A realtor Santa Monica will help you make the right decisions and get the best deal possible.
3. There Is No Perfect Home
Given that you are buying your first home, you must have dreamed about the ideal house and are not willing to settle for anything less. Everyone has been there! However, you need to understand that in real estate, you sometimes have to compromise. Generally, buyers prioritize three main things; location, size, and price. From a realistic point of view, you should expect to achieve only two of the three items.
You might get the best deal on a home, but it is not located in an ideal location or best neighborhood. On the other hand, you might get a good house in a great neighborhood and location, but its down payment is too high.
You might also get an affordable home in a great location, but it is too small. This shows that it is very difficult to achieve all three items on the checklist. Therefore, you should be willing to compromise.
4. Do Your Research
After identifying a home you like, make an offer and if it is accepted, you might be excited and eager to move in. You shouldn’t rush into moving in. You shouldn’t make any payments or purchases without doing your due diligence.
It is also ideal to add some contingencies to the contract — this gives you the right to back out of the deal should something go wrong with the house.
A home inspection is one of the most common contract contingencies. It allows buyers to request a solution for all the identified issues like a leaky roof or weak foundation. A realtor Santa Monica will help you point out some of these issues and have them fixed.
You can also include the financing contingency which gives you the right to back out of the deal in case the bank fails to approve your loan. This gives you the ability to manage your financial situation without pressure.
5. Understand the Tax Credit Options
It is also helpful to know your tax credit options. Even though the first-time home buyer tax credit might no longer be applicable, there are several tax breaks you are not aware of. Therefore, it is essential that you know all the tax credit options and evaluates their application.
If you purchased discount points for your mortgage, they could be deductible. This might put you at a disadvantage especially if you take a loan to facilitate the home purchase.
Buying a home for the first time can be very exciting. However, you should consider various factors that help you make the right decision. The points discussed here will go a long way in getting you the best deal possible.